Shree Synthetics faces closure

Firm writes to Babulal Gaur for tax relief

Ujjain-based Shree Synthetics Ltd, one of the oldest nylon-manufacturing firms, has turned sick and is facing closure. The firm has been declared sick by the Board of Industrial and Financial Reconstruction.

According to sources, salaries of many of the employees have not been paid for two months. The firm employs 1,700 people, supporting more than 2,000 families directly and indirectly.

The MP government has refused further assistance to the company. The company, according to sources, has to pay out entry tax dues of Rs 6.53 crore and Rs 2.70 crore as surcharge, apart from various other liabilities.

While contacted, the company chairman, Shreekant Bangur, was not forthcoming on the reasons for his company's financial strain.

He wrote a letter to Chief Minister Babulal Gaur in May, asking for an exemption for 10 years more from the present rate of the entry tax on raw materials including incidental goods, packing material, fuels, lubricants, and plant and machinery. The exemption should start from November 1, 2004, he said.

The company has also asked for an exemption from the purchase tax and the commercial tax/central sales tax. At present, the commercial tax/central sales tax is levied at 2 per cent on sales of yarn. "Also, a surcharge is levied at 15 per cent," Bangur wrote in his letter to Gaur.

According to the letter, available with Business Standard, the company has commercial tax arrears of Rs 15.51 lakh, central sales tax arrears of Rs 55.72 lakh, and professional tax arrears of Rs 30.89 lakh, outstanding as on October 31, 2004.

The firm wants to clear arrears in instalments of Rs 5 lakh per month, without interest, with a moratorium period of two years. The company wants entry tax arrears waived.

Due to default in payment, the state electricity cut power connection on June 21 last year and the company stopped production. The employees of the company protested against the board's decision.

The company's letter to Gaur said to obtain concessions from the board and the state government, "the workforce has agreed to a reduction [of salary] of approximately Rs 1,900 per month per worker, and for staff and officers up to Rs 5,000 per month, including bonus and annual allowances."

The production of the company, according to sources, has come down from 16 tonnes of nylon per day to 9 tonnes, and its polyester chip capacity of 1,200 tonnes per month continues to remain idle since the company is waiting for exemption or reduction in the entry tax.

The company has also pointed out if the value-added tax is enforced, it will become unsustainable because it will have to source inputs directly from Gujarat State Fertilisers & Chemicals Ltd, Vadodra, and will have to pay the additional tax entry tax at 3 per cent, instead of purchasing directly from Indore.

Principal Secretary (Industries) Vishwapati Trivedi and Managing Director of the Madhya Pradesh State Industrial Development Corporation Raghav Chandra were not available for comment.